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Discussion Forum Index --> Basic Tax Questions --> Change in beginning inventory
Discussion Forum Index --> Tax Questions --> Change in beginning inventory
Bobkim (talk|edits) said:
| 6 September 2008
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| I have a client who builds houses and sells them. I report the cost of building the houses as inventory. One house he built was not selling and he decided to rent it. I moved the cost of the house to fixed assets and depreciated it. How do I report this on form 1120? If I just reduce the beginning inventory by the cost will it raise a flag. Do I change the beginning inventory and attach a note explaing the change? Thank you.
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Blrgcpa (talk|edits) said:
| 6 September 2008
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| How long has it been rented? Maybe you can adjust the entire purchases or closing inventory.
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Me and the Boss (talk|edits) said:
| 6 September 2008
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| Off the top of my head, it appears he "sold" it to himself at cost. Remove it from ending inventory (leave beginning inventory alone) and show the cost of the house as "other income - transfer inventory to rental property". Show cost and accumulated depreciation on balance sheet, rental activity on Form 8825. Did I miss anything?
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Bobkim (talk|edits) said:
| 6 September 2008
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| The tax year is 06/30/08. At 06/30/07 he was still building it. It was rented for 9 months. It is a C-Corp so the rental income would go on page 1. The total cost was $952,217. If I show this as other income, would I also show this as cost of sales? If I show the $952,217 as cost of sales, he only had one sale for $336,339 so the cost would be higher than the sales. Thanks.
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